T Thabane and E Snyman-Van Deventer*

T THABANE & E SNYMAN VAN DEVENTER PER / PELJ 2018 (21) 1

Abstract

Globally, states use state-owned companies (SOCs) or public corporations to provide public goods, limit private and foreign control of the domestic economy, generate public funds for the fiscus, increase service delivery and encourage economic development and industrialisation. Particularly given its unique socio-political and economic dynamics, a country such as South Africa clearly needs this type of strategic enterprise. Yet, that does not mean that everything at our SOCs is as it should be. The beleaguered South African Broadcasting Corporation (SABC) has recently seen the resignation of board members, shareholder interference in its operational affairs, and a high turnover of chief accounting officers and other executive management members. Due to non-performance, it has also received several cash injections from its shareholder to enable it to continue to deliver its services. In addition, the shareholder minister took it upon herself to amend the SABC's memorandum of incorporation, conferring upon herself the authority to appoint, suspend or even dismiss key executive members. South African Airways (SAA), in turn, has had seven CEOs in less than four years, has had to be bailed out at a cost of R550 million, and has in addition been granted a R5 billion guarantee by the shareholder for a restructuring exercise. Other SOCs such as Eskom, the Post Office and Telkom have also experienced high board and executive management turnover, perennial underperformance necessitating regular bailouts, and challenges regarding the division of power between their boards and the various shareholder ministers. Another issue that seems to plague South Africa's SOCs is the appointment of board members and executive officials with questionable qualifications. By critically examining the corporate governance challenges besetting the SABC, SAA and Eskom in particular, this article seeks to explore the root causes of the corporate governance deficiencies of SOCs, and how their corporate governance can be enhanced. It is concluded that the challenges faced by the country's SOCs are twofold: firstly, the SOCs boards' lack of appreciation of the cardinal corporate governance rules, and secondly, the role of government as a single or dominant shareholder, which results in substantial political interference in the running of the SOCs. This dual problem requires a dual solution. To arrest the problem of poor corporate governance in SOCs, government as the shareholder should firstly appoint fit and proper directors, having followed a sound due-diligence process. Once it has established such properly skilled and competent boards, however, government should adopt an arm's-length approach to the affairs of the SOCs as a way of insulating these corporations from political interference.

Keywords

State-owned companies; corporate governance; deficiencies; South Africa; SAA; SABC; Eskom

……………………………………………………….

Pathological Corporate Governance Deficiencies

in South Africa's State-Owned Companies:

A Critical Reflection

T Thabane and E Snyman-Van Deventer*

Pioneer in peer-reviewed,

open access online law publications

Authors

Tebello Thabane Elizabeth Snyman van Deventer

Affiliation

University of Cape Town University of the Free State South Africa

Email

[email protected] [email protected]

Date of submission

2 May 2017

Date published

8 January 2018

Editor Prof O Fuo

How to cite this article

Thabane T and Snyman-Van Deventer E "Pathological Corporate Governance Deficiencies in South Africa's State-Owned Companies: A Critical Reflection" PER / PELJ 2018(21) - DOI http://dx.doi.org/10.17159/1727-3781/2018/v21i0a2345

Copyright

DOI http://dx.doi.org/10.17159/1727-3781/2018/v21i0a2345

https://creativecommons.org/licenses/by/4.0/


1 Introduction

In 2014, the office of the South African Public Protector in a published

report found developments at the South African Broadcasting Corporation

(SABC), a state-owned company, to be "symptomatic of pathological

corporate governance deficiencies".1 In addition, the Public Protector

found that the SABC board had failed "to provide strategic oversight to the

national broadcaster as provided for in the SABC Board Charter and King

III Report".2

Of course, failure of corporate governance is in no way unique to the

SABC. Within the South African context, other examples where failed

corporate governance has led to reduced shareholder value or even the

total collapse of companies include Masterbond, CNA, Unifer, Tollgate and

Leisurenet.3 This contribution, however, will focus specifically on corporate

governance at the country's state-owned companies (SOCs), for a few

reasons. Firstly, SOCs play a significant part in the growth, development

and stability of the South African economy, with key SOCs being the

Development Bank of Southern Africa, South African Airways (SAA),

Eskom, Telkom and Transnet.4 Secondly, good corporate governance in

SOCs also serves to incentivise other companies to embrace corporate

governance principles, which may ultimately see an improvement in the

country's global market power and ability to attract foreign investment.5

Thirdly, SOCs generally provide basic services to society, which means

* Tebello Thabane. BA Law LLB (Lesotho) LLM (Pretoria) LLM (Free State). Lecturer

in Commercial Law, University of Cape Town, PhD Candidate (UCT), South Africa. Email: [email protected].

** Elizabeth Snyman-Van Deventer. BIuris LLB LLM LLM LLD (Free State). Professor in Mercantile Law, University of the Free State, South Africa. Email: [email protected].

1 Office of the Public Protector 2014 http://www.pprotect.org/sites/default/files/

Legislation_report/SABC%20FINAL%20REPORT%2017%20FEBRUARY%202014.pdf 20.

2 Office of the Public Protector 2014 http://www.pprotect.org/sites/default/files/

Legislation_report/SABC%20FINAL%20REPORT%2017%20FEBRUARY%202014.pdf 21.

3 Ahunwan Globalisation and Corporate Governance 13; Nancy et al Enron and

other Corporate Fiascos. 4 Others include Denel, Airports Company South Africa, the Public Investment

Corporation, the Government Employees Medical Scheme, the Government Employees Pension Fund and the SA Post Office.

5 Makuta 2009 Malawi LJ 55, 60.

mailto:[email protected]


that in most instances the very fabric of our lives depends on whether or

not these companies are successfully governed.6

Following the inception of democracy, the new South African government

was faced with the problem of having inherited many underperforming

SOCs from the previous dispensation, some of which the Mandela

administration subsequently tried to "offload" through privatisation.7 Today,

there are several opposing views regarding the country's SOCs. There are

those who call for the privatisation of non-performing SOCs; others argue

that South Africa cannot become a fully developed state without strategic

government intervention in the economy; while some continue to seek the

nationalisation of all strategically important companies to assist the poor.

Calls to privatise some SOCs due to their poor governance and non-

performance are particularly prevalent in the media.8 These conflicting

opinions even culminated in a study commissioned by the president to

investigate the role of SOCs in a developmental state.9

1.1 Defining corporate governance in the SOC setting

Although no standard definition of corporate governance exists, the United

Kingdom's so-called Cadbury Report and the first King Report10 both view

corporate governance as "the system by which companies are directed

and controlled". However, as this Cadbury/King definition has been

criticised for being deceptively simple and lacking nuance,11 this article

uses the more comprehensive and nuanced definition offered by Du

Plessis and colleagues, who regard corporate governance as:

… the process of controlling management and of balancing the interests of all internal stakeholders and other parties who can be affected by the corporation's conduct in order to ensure responsible behaviour by corporations and to achieve the maximum level of efficiency and profitability

for a corporation.12

In the SOC setting, therefore, corporate governance refers to the process

of governing SOCs with the same sound corporate controls and

management as other, profit-seeking companies, even though SOCs may

6 McGregor 2015 The Thinker 67. 7 Afeikhena "Privatisation and Regulation in SA". 8 Afeikhena "Privatisation and Regulation in SA". 9 PRC 2010 The Role of State-Owned Enterprises in the Developmental State (on

file with the authors). 10 Cadbury Report of Committee on Financial Aspects para 2.5; IoDSA King Report I. 11 Jordan Cadbury Twenty Years On 6. 12 Du Plessis, Hargovan and Bagaric Principles of Contemporary Corporate

Governance 6-7.


have social or public goals that profit-seeking companies potentially do

not. SOCs must be actively owned and managed so as to achieve their

stated objectives in an efficient, effective and socially responsible way,

while also ensuring that they fulfil their social responsibilities to

government as a shareholder, other stakeholders, and the country's

citizens generally.13

1.2 Setting the scene: How are our SOCs?

Studies14 reveal that states worldwide use SOCs, or public corporations,

for many strategic reasons, inter alia to provide "public" as opposed to

"private" goods. Governments may also run public corporations to improve

labour relations in strategic economic sectors, limit private and foreign

control of the domestic economy, generate public funds for the fiscus,

increase service delivery, and encourage economic development and

industrialisation.15 Clearly, therefore, a country such as South Africa needs

this type of strategic enterprise, particularly given its unique socio-political

and economic dynamics characterised by a legacy of societal segregation.

So, despite renewed calls for the privatisation of SOCs in South Africa,

these corporations are likely to, and indeed must, remain under state

ownership for the foreseeable future. Yet that does not mean that

everything at our SOCs is as it should be.

The SABC, for instance, has recently seen the resignation of board

members, inter alia due to shareholder or, to be more precise, ministerial

interference in its operational affairs, which led to a board/shareholder

fallout. The corporation has had a high turnover of chief accounting

officers and other executive management members. Due to non-

performance, it has also received several cash injections from its

shareholder to continue to deliver its services. In its 2014/15 financial

statements the SABC reported a loss of approximately R395 million; at the

same time, however, its embattled chief operating officer's salary

increased from R2,8 million to R3,7 million.16 Poor corporate governance

at the SABC is also evident in the amendment of the memorandum of

incorporation by the minister, as shareholder, conferring upon herself the

authority to appoint, suspend or even dismiss the chief executive officer

13 PwC 2015 https://www.pwc.com/gx/en/psrc/publications/assets/pwc-state-owned-

enterprise-psrc.pdf 42. 14 OECD OECD Comparative Report; World Bank Held by the Visible Hand. 15 PwC 2015 https://www.pwc.com/gx/en/psrc/publications/assets/pwc-state-owned-

enterprise-psrc.pdf 4. 16 SABC 2015 http://www.sabc.co.za/sabc/annual-reports.


(CEO), chief operating officer (COO) and chief finance officer (CFO).17

This raises questions about the division of power between the SABC

board and shareholder.18

South African Airways (SAA), in turn, has had seven CEOs in less than

four years.19 In the same period the corporation received a bailout of R550

million to cover fuel costs and has been granted a R5 billion guarantee by

the shareholder for a restructuring exercise. This proves that the state-

owned carrier is neither managed nor owned appropriately, running at a

huge loss that costs taxpayers dearly.

Other SOCs such as Eskom, the Post Office and Telkom have also

experienced high board and executive management turnover, perennial

underperformance necessitating regular bailouts, and challenges

regarding the division of power between their boards and the various

shareholder ministers. Most of these boards fail to function in accordance

with the requirements of the Companies Act.20 This appears from the

warning by the Companies and Intellectual Property Commission (CIPC)

issued to the boards of five SOCs that they are running the risk of being

declared delinquent or being placed under probation in terms of section

162 of the Companies Act for failing to adhere to the concerns that the

Auditor-General raised in their respective annual financial reports.21

Another issue that seems to plague South Africa's SOCs is controversy

surrounding the appointment of board members and executive officials

with questionable qualifications. For good governance, board members

and executive managers or officials must have the qualifications,

experience and integrity to lead SOCs. If they do not, this casts doubt on

the reasons for their appointment by the shareholder ministers and boards

respectively.

As corporate governance in many SOCs is seemingly suspect, this article

seeks to explore the root causes of these corporate governance

deficiencies, the specific governance challenges involved, and how

17 Gqirana 2015 https://www.news24.com/SouthAfrica/News/sabc-take-over-

unconstitutional-da-20151206. 18 Section 66 of the Companies Act 71 of 2008 gives the board authority to run the

corporation, including appointing executive managers, while s 68 gives shareholders the power to appoint the board, but not managers.

19 Hill and Bowker 2015 https://www.biznews.com/sa-investing/2015/11/18/poisoned-

chalice-saa-gets-7th-ceo-in-4yrs-hr-turnaround-not-strategy/. 20 Companies Act 71 of 2008. 21 CIPC 2014 http://www.cipc.co.za/files/6514/1933/0901/Media_Statement

_2_of_2014.pdf.


corporate governance can be enhanced. To this end, once the theoretical

and legislative framework pertaining to SOCs has been established, the

article critically examines the specific corporate governance challenges

besetting a selection of South African SOCs, namely the SABC, SAA and

Eskom. The fact that these SOCs have different shareholder ministries22

offers a good basis for comparison of how the role of the shareholder in

particular affects corporate governance at these entities.

2 Anchoring corporate governance of SOCs in a

theoretical and legislative framework

2.1 Theoretical framework

In general, corporate governance may be understood in terms of five

theories, namely the agency theory, the stewardship theory, the

enlightened shareholder theory, the new corporate governance theory and

Wong's three pillars of SOC reform. In order to understand the peculiar

agency problems inflicted on SOCs by both boards and shareholder

ministers, who are not the SOC owners and whose vigilance in directing

and overseeing SOCs is thus often questionable, a relevant theory would

be the agency theory, supplemented with elements from Wong's theory for

SOC reform. Given the nature of SOCs, being public corporations with

public funding and a myriad of stakeholders, the stewardship theory may

also shed more light on how the relationship between these many

stakeholders affects corporate governance at the selected SOCs.

2.1.1 Agency theory, supplemented with Wong's three pillars of SOC

reform

The agency problem has been aptly encapsulated as follows:

The directors of companies, being managers of other people's money, cannot be expected to watch over it with the same vigilance with which they

watch over their own.23

At the heart of the agency problem, therefore, is the self-serving or self-

seeking nature of human beings.24 In corporate governance, the agency

dilemma arises where the governance relationship between the

shareholders (the principals) and the directors (the agents) is such that the

latter seek to maximise their own personal benefit through actions

22 Communications, Treasury and Public Enterprises respectively. 23 Smith in Tricker Corporate Governance 58. 24 Chang State-Owned Enterprises Reform 14.


beneficial to themselves, but detrimental to the shareholders.25 This is

even more pronounced when there is a separation of ownership and

control, with management developing a tendency to act in this self-serving

manner because it receives only a tiny fraction of the profits generated by

its activities, rarely owning a substantial number of shares in such

companies.

Since SOCs are run by directors and managers who do not and, by

definition, cannot own the corporations, as they are owned by the state

and, therefore, the citizenry, agency problems may be acute due to this

divergence of interests. In fact, in SOCs, agency has two layers: the

directors who serve on behalf of the shareholder, and the shareholder who

represents the actual owners, namely the public. Therefore, in the same

way that the directors cannot be expected to watch over the SOC's

interests as vigilantly as they would watch over their own, the shareholder

minister may also lack the required vigilance.26 This problem of "double

agency" unique to SOCs implies that corporate governance issues in

these corporations centre on both agency costs and political costs. This,

then, overlaps and ties in with Wong's three pillars for SOC reform, namely

political interference, a lack of clear mandates and a lack of

transparency.27 Clearly, therefore, any assessment of corporate

governance in SOCs should address those areas where agency costs,

political costs (interference/meddling), a lack of transparency or a lack of

clear mandates may have an influence. These would include the

appointment and composition of boards, board compensation and

executive remuneration, board authority in relation to the shareholder, the

division and delegation of power within SOCs, ethics and integrity, the

multifaceted role of government as the shareholder, regulator, financier

and customer, and its impact on corporate governance, and, finally, the

ownership model of SOCs, and its impact on corporate governance.

The agency problem may in turn lead to the free rider problem, which

confronts SOCs in a unique way. Citizens, it is argued, do not have the

means or incentive to monitor the shareholder minister and directors'

performance; they lack the information and institutional capacity to

negotiate management's employment or to monitor and control

25 Chang State-Owned Enterprises Reform 14. 26 Lin 2012 Asian Bus Law 115-135, which comprehensively deals with the problems

of agency facing China's SOEs; Chiu and Lewis Reforming China's State-Owned Enterprises 140; Menozzi and Gutiérrez 2008 https://www.webssa.net/files/ Gutierrez-Menozzi_Board_composition_in_SOEs.pdf.

27 Wong 2004 Corp Gov 6.


management's activities.28 Judging by the corporate governance

challenges facing South Africa's SOCs, there seems to be some credence

to the free rider argument. However, since shareholder ministers and

boards account for SOCs' performance before parliament, which

represents the public, it cannot be argued that there is no public

monitoring. Probably closer to the truth is that parliament lacks

effectiveness in monitoring the SOCs. A thorough assessment of the

sufficiency of the present arrangement of ownership and control of SOCs

through various ministries and the role of parliament may therefore prove

useful.

2.1.2 Stewardship theory

It is true, however, that the underpinning assumptions of the agency

theory may not apply to all directors and at all times,29 and in effect ignore

the complexities associated with running companies – hence the need for

the stewardship theory. Unlike the agency theory, the stewardship theory

largely views governance from the legal perspective of the corporation.

Put simply, upon incorporation a company becomes a separate legal

entity, distinct from its shareholders. The shareholders appoint directors to

run the company and act as stewards for shareholder interests. The

directors' report to shareholders on the results of their stewardship is

usually accompanied by an independent auditor's report verifying the

company's financial health.30 Stewardship is also grounded in the many

duties that directors owe to the company and, by extension, the

shareholders, such as fiduciary duties and the duty to exercise care, skill

and diligence, which are now entrenched in the Companies Act.31 Thus,

there is an inherent belief that the directors will not conduct the

corporation's affairs in a self-serving manner and can be trusted to operate

the business in shareholders' interest.32

The stewardship theory has come under heavy criticism in recent times,

however, with the trust owing by directors having been eroded by

corporate scandals involving risky trading, obscene directors'

remuneration, non-disclosure and general manipulation of company books

to reflect non-existent profits.33 This underlines the need for corporate

28 Victor 1985 Colum L Rev 1403-1444. 29 Tricker Corporate Governance 65. 30 Tricker Corporate Governance 65. 31 Section 76 of Companies Act 71 of 2008. 32 Donaldson and Davis 1991 Aust J Manag 49-64. 33 Tricker Corporate Governance 66.


governance principles to guide boards' operations. In the SOC context,

shareholder ministers must be very vigilant to ensure that boards act in the

interest of the company and are true stewards of the state's interests.

2.2 Legislative framework

SOCs are legal creatures. They fall squarely within the ambit of the

Companies Act,34 and being state-owned, they are also run subject to the

dictates of the Public Finance Management Act (PFMA).35 In addition,

SOCs have their own founding legislation that determines their specific

public mandates. Being companies in their own right, they also have to

implement the recommendations of King III.36 Finally, as public-sector

corporations they are expected to implement the Protocol on Corporate

Governance in the Public Sector.37 The following paragraphs briefly

explore some of the key corporate governance issues addressed in this

legislative framework, including the centrality of the board in governance

issues, the division of power among corporate organs, the delegation of

power by the board to the executive management, the board's

appointment and composition, the board's accountability, the standards of

directors' conduct, and conflict of interest.38

2.2.1 The 2008 Companies Act

In terms of the Companies Act, an SOC must have a board, which is

charged with the primary responsibility of exercising all the powers and

performing any of the functions of the SOC, except where limited by the

Act itself or the memorandum of incorporation.39 This is an important

provision, considering the political meddling sometimes experienced by

the boards of SOCs from their shareholder ministers, with a case in point

being the communications minister who sought to arrogate the power to

appoint, suspend and dismiss key officers of the SABC.40 An SOC board

34 Companies Act 71 of 2008, as amended by the Companies Amendment Act 3 of

2011, read with the Companies Regulations, 2011 (GN R351 in GG 34239 of 26 Aril 2011).

35 Public Finance Management Act 1 of 1999 (the PFMA). 36 IoDSA King Report III. 37 Department of Public Enterprises Protocol on Corporate Governance. 38 For a comprehensive comparison of the PFMA, Companies Act and King III, see

PwC 2012 https://www.pwc.co.za/en/assets/pdf/companies-act-steering-point-4.pdf.

39 Section 66(1)(2) of Companies Act 71 of 2008. 40 Gqirana 2015 Gqirana 2015 https://www.news24.com/SouthAfrica/News/sabc-

take-over-unconstitutional-da-20151206.


should consist of at least three directors and must establish a social and

ethics committee.41

SOC directors must act in good faith and for proper purpose. They must

also act in the best interest of the SOC, and with the degree of care, skill

and diligence that may reasonably be expected of similarly situated and

able persons.42 The obligations of acting in the best interest of the SOC

and of care, skill and diligence are considered discharged when a director

takes reasonable, diligent steps to familiarise him/herself with a matter,

has no material personal interest in any matter under deliberation, and

makes rational decisions.43 Given the laxity displayed by some SOC

directors in the recent past, it is arguable whether these crucial provisions

are observed.44

2.2.2 The Public Finance Management Act

The PFMA establishes the accountability of the SOC board and requires

directors to exercise the duty of utmost care so as to ensure reasonable

protection of the SOC's assets and records. To this end, the directors must

act with fidelity, honesty, integrity and in the best interest of the SOC in

managing its financial affairs, and must on request disclose to the minister

responsible for that SOC, or to the legislature to which the SOC is

accountable, all material facts, including those reasonably discoverable,

which may in any way influence the minister's or legislature's decisions or

actions. Furthermore, directors must, within the board's sphere of

influence, seek to prevent any prejudice to the SOC's financial interests.45

Yet, despite this elaborate exposition of the duties of SOC directors to

diligently manage SOC finances and disclose the necessary information to

the minister shareholder and the legislature, recklessness in the financial

management of SOCs such as SAA, Eskom and the SABC is rife to such

an extent that they have frequently to be bailed out by the state.

In terms of section 50(2) of the PFMA, an SOC director may not act in a

way that is inconsistent with the responsibilities assigned to the board, or

41 Section 72(4) of Companies Act 71 of 2008, read with Reg 43 of the Companies

Regulations, 2011. 42 Section 76 of Companies Act 71 of 2008. 43 Sections 76(3)(b) and (c) of Companies Act 71 of 2008. 44 CIPC 2014 http://www.cipc.co.za/files/6514/1933/0901/Media_Statement_2_of

_2014.pdf. The CPIC threatened to apply for an order declaring the boards of some SOCs delinquent for failure to comply with the Auditor-General's directions.

45 Section 49 read with s 50 of the PFMA.


use the position or privileges of, or confidential information obtained as, a

director for personal gain or to improperly benefit another person. To curb

the abuse or misuse of information, SOC directors must disclose their

interests to the board, whether direct or indirect, and withdraw from board

proceedings when any matter in which they have such interest is

considered, unless the board decides that the member's direct or indirect

interest in the matter is inconsequential or irrelevant.46

Section 51 requires the SOC board to maintain effective, efficient and

transparent systems of financial and risk management as well as internal

control; an internal audit system under the control and direction of an audit

committee that complies with and operates in accordance with the

Treasury regulations and the PFMA itself, and an appropriate procurement

and provisioning system that is fair, equitable, transparent, competitive

and cost-effective.

However, notwithstanding these clear provisions of the PFMA, some

SOCs' directors have been implicated in meddling in the awarding of

lucrative tenders.47 Arguably, therefore, PFMA compliance in some SOCs

is questionable.

2.2.3 Founding legislation of SOCs

SOCs owe their existence to their founding legislation, which typically

provides for their establishment, control, powers, functions and funding.

The founding legislation is entity-specific.

The SABC, for instance, is established by the Broadcasting Act.48 The

objects of the Act include to establish and develop a broadcasting policy in

South Africa in the public interest and, for that purpose, to establish a

strong and committed public broadcasting service that will serve the needs

of the South African society.49 Part 5 of the Act deals specifically with

issues of governance of the SABC. It provides that the board shall consist

of two executive directors and 12 non-executive directors appointed by the

president on the National Assembly's advice. It also provides for the

auditing of the SABC's financial books.

46 PwC 2012 https://www.pwc.co.za/en/assets/pdf/companies-act-steering-point-4.pdf

8. 47 Brümmer and Sole 2008 Mail & Guardian. 48 Broadcasting Act 4 of 1999. 49 Section 2 of the Broadcasting Act 4 of 1999.


SAA, in turn, used to be a subsidiary of Transnet. In 2007, however, it was

independently established in terms of the SAA Act, which provided for the

transfer of Transnet shares in SAA to the state, and the conversion of SAA

into a public company having a share capital incorporated in terms of the

Companies Act.50 Section 2(c) of the SAA Act provides for the listing of

SAA as a major public entity in schedule 2 to the PFMA, thus bringing

SAA within the ambit of the latter Act. Although the SAA Act does not

contain specific governance provisions, the company is subject to the

governance provisions in the PFMA, the Companies Act and King III.

Similar to the SAA Act, Eskom's founding legislation – the Eskom

Conversion Act – is not elaborate, stating as its main objective the

conversion of Eskom from a statutory body into a public company, Eskom

Holdings.51 In terms of the PFMA, the accounting authority of the

corporation is its board of directors, which is largely responsible for

mapping the strategic direction and leadership of the corporation and

ensuring that corporate governance and ethics are observed. The

principles of corporate governance applicable to Eskom are therefore not

necessarily found in its founding legislation, but in the Companies Act, the

PFMA, King III and the Protocol on Corporate Governance in the Public

Sector collectively.

2.2.4 King III

In terms of King III, the board should act as the focal point for and

custodian of corporate governance.52 It should comprise a balance of

power, with a majority of non-executive directors, the majority of whom

should be independent.53 Similar to the Companies Act and the PFMA,

King III requires SOC directors to always act in the best interest of the

company.54

More specifically, King III directs SOC boards to appreciate that strategy,

risk, performance and sustainability are inseparable; to provide effective

leadership based on an ethical foundation; to ensure that the SOC is, and

is seen to be, a responsible corporate citizen; to ensure that the SOC's

ethics are managed effectively; to ensure that the SOC has an effective

and independent audit committee, and to be responsible for the

50 South African Airways Act 5 of 2007 (SAA Act). 51 Eskom Conversion Act 13 of 2001. 52 IoDSA King Report III Principle 2.1. 53 IoDSA King Report III Principle 2.18. 54 IoDSA King Report III Principle 2.14.


governance of risk.55 All these requirements are meant to bolster SOC

governance and complement the provisions of the Companies Act and the

PFMA.

The balance of power within the SOC board is vital. King III provides that

the board itself should elect a chairman who is an independent non-

executive director. For obvious reasons, the CEO of the SOC may not

double up as the chairman of the board.56 The board should also appoint

the CEO and establish a framework for the delegation of authority.57 Yet in

some SOCs, the shareholder minister appoints the CEO, which probably

does not auger well for corporate governance. As will be argued later,

evidence exists that where a shareholder minister appoints a CEO, the

latter does not believe him/herself accountable to the board, but instead to

the minister who made the appointment, which renders the board

powerless against the executive management. Such a board will struggle

to act as a custodian of corporate governance.

2.3.5 Protocol on Corporate Governance in the Public Sector

The Protocol on Corporate Governance in the Public Sector ("the

Protocol") provides guidance to various public entities, including SOCs,58

taking into account SOCs' unique mandate, which includes the

achievement of government's socio-politico-economic objectives. The

Protocol was developed because of the realisation that the King Code,

being of general application, does not cover governance issues specific to

the public sector. However, the principles of the Protocol seek only to

amplify and not to supersede (or contradict) those in the King Code, which

is why the two should in fact be read together.59

The Protocol recognises that SOCs face serious financial, reputational,

political and operational risks,60 and consequently have to adhere to the

highest standards of corporate governance. Similar to King III, the Protocol

provides that an SOC board, being a fundamental basis of corporate

governance, must effectively and efficiently control and head the

corporation. To this end, the Protocol requires boards to comprise both

55 IoDSA King Report III Principle 2. 56 IoDSA King Report III Principle 2.16. 57 IoDSA King Report III Principle 2.17. 58 Department of Public Enterprises Protocol on Corporate Governance; Koma 2009

J Publ Adm 451-459. 59 Department of Public Enterprises Protocol on Corporate Governance para 2.2. 60 Department of Public Enterprises Protocol on Corporate Governance para 2.3.


executive and non-executive directors, with the latter being in the majority

to safeguard independent and objective decision-making.61

The Protocol goes on to state that the SOC board is charged with absolute

responsibility for the SOC's performance, for which the board is fully

accountable to the shareholder.62 It also recommends that the board

should appoint one of its members, preferably an independent non-

executive director (unless otherwise agreed by the shareholder), as board

chairperson.63

Interestingly, the Protocol acknowledges that an SOC's performance

depends on its board's capabilities and performance, and recommends

that the shareholder should therefore ensure that the board is properly

constituted with individuals who possess integrity and accountability,

competence, relevant and complementary skills, experience and

expertise.64 Despite this clear recommendation, media reports abound of

SOC boards comprising some individuals of questionable integrity and

character, who have been implicated in falsifying their qualifications and

meddling in tenders. This raises questions as to the prudence with which

the relevant shareholder ministers made those specific board

appointments. Therefore, it can be concluded that the Protocol replicates

the King Code in material respects, although its implementation is

inadequate.

3 A detailed assessment of the state of corporate

governance in SAA, the SABC and Eskom

Despite the well-established theoretical and legislative frameworks within

which SOCs are understood and operated, the corporate governance

challenges within many of these companies seem endless. This leads one

to conclude that the problem may not necessarily be the frameworks,65 but

instead their implementation.

The poor state of corporate governance was recognised as far back as

2002, when the Protocol on Corporate Governance in the Public Sector

was passed, yet the problem has remained unabated. Severe

underperformance, frequent bailouts, high board and CEO turnovers and

61 Department of Public Enterprises Protocol on Corporate Governance para 5.1. 62 Department of Public Enterprises Protocol on Corporate Governance para 5.1.1.1. 63 Department of Public Enterprises Protocol on Corporate Governance para 5.1.2.1. 64 Department of Public Enterprises Protocol on Corporate Governance para 5.1.6.1. 65 Lipton and Lorsch 1992 Bus Law 59-77.


shareholder interference in board matters continue to characterise most of

the country's SOCs. The National Assembly, the Presidency and many

other stakeholders all agree that urgent improvement is needed. To this

end the Presidency commissioned studies on SOC governance and

ownership, and the National Assembly urged the Department of Public

Enterprises to urgently table a bill addressing the governance of these

companies. In seeking possible solutions, the following paragraphs

explore the specific corporate governance challenges confronting SAA,

the SABC and Eskom, speculating on the reasons for the challenges, with

the ultimate aim of making recommendations for improvement.

3.1 South African Airways

Of the government SOC portfolio, the national carrier, SAA, is arguably

one of the worst underperformers. At one stage the corporation developed

eight turnaround strategies within a period of six years but implemented

none.66 SAA has had seven CEOs within a period of four years.67 The

corporation has also underperformed financially, necessitating a capital

injection by the shareholder on numerous occasions.68 This, accompanied

by board infighting, has often led to the shareholder firing the entire

board.69 Scandals that faced SAA include tender irregularities implicating

both executive managers and some board members, and board members

and executive managers' bogus and/or lack of qualifications. Emanating

from these issues are a number of corporate governance concerns:

a) The fact that the qualifications ascribed to some board members are

allegedly false or non-existent clearly shows that SAA board

composition may be a problem. As the shareholder, the government

has not taken care to appoint the best-qualified individuals to the

board. Due diligence has not been followed to ensure that board

members are fit and proper. King III and the Protocol on Corporate

Governance in the Public Sector emphasise the need for a majority

of independent directors. Granted, the majority of the members of the

SOC boards, including SAA's, are "independent". Yet, due to the

66 Landu 2013 Public Enterprises Committee Unhappy with SAA

http://www.parliament.gov.za/live/content.php?Item_ID=2872. 67 Landu 2013 Public Enterprises Committee Unhappy with SAA

http://www.parliament.gov.za/live/content.php?Item_ID=2872. 68 This was the subject of litigation in Comair Limited v Minister of Public Enterprises

2016 1 SA 1 (GP), where SAA's shareholder and SAA were accused of uncompetitive behaviour after the shareholder provided SAA with a R5 billion guarantee due to its poor financial position.

69 Maqutu Financial Mail.

http://www.parliament.gov.za/live/content.php?Item_ID=2872



growing commercialisation of SOCs, directors must also have the

qualifications, commercial experience and acumen to lead their

corporations in a globally competitive environment – in SAA's case,

the airline business. As some board members allegedly lack

appropriate qualifications and commercial experience, it is thus

tempting to argue that some SAA board members are political

appointees deployed from the ranks of political parties in an insidious

system of political patronage.70

b) The SAA board's implication in tender irregularities suggests that the

established governance principle of delegation of power by the board

to the executive management has not been properly followed.

Although the board is supposed to govern the corporation by

delegating the responsibility of managing the day-to-day affairs to the

executive management, SAA's board, or at least some of its

members, has been implicated in meddling in day-to-day business

matters such as tenders. This not only violates the principle of power

delegation, but also raises the important corporate governance issue

of ethics and integrity.

c) That the corporation developed eight turnaround strategies within six

years but implemented none shows that the board has failed in its

primary duty of providing strategic guidance and monitoring. It may

also be argued that the board failed to discharge both its fiduciary

duty and the duty of care, skill and diligence towards SAA.

d) The reported board infighting points to an internal governance

problem of poor leadership, which results in board instability – this in

spite of board stability's being a sine quo non for any corporation's

corporate governance and good performance.

e) Finally, sound corporate governance at SAA is further impeded by

the high board and CEO turnover. In terms of King III and the

Protocol, the board should act as the focal point for and custodian of

corporate governance.71 A high turnover means that, at any given

time, the board and executive management lack the stability,

continuity and institutional memory to resolve the complex

governance issues confronting the organisation.

70 A similar view is held by Howard and Seith-Purdie 2005 Aust J Publ Adm 56-68

commenting on governance issues in Australian public entities. 71 IoDSA King Report III Principle 2.1.


3.2 South African Broadcasting Corporation

Under the previous dispensation, the SABC was a strategic SOC due to its

role as a government mouthpiece. With the dawn of democracy, the

mandate of the corporation had to be extended to include the values of the

new Constitution, which resulted in the "public broadcaster" mandate.72

This mandate prevents the corporation from being used as a mouthpiece

for a particular political party or section of society. Instead, it has to serve

the entire nation in an open and transparent manner. Yet, since the

business of news and the modes of relaying information are of particular

importance to politicians, with the media often shaping a society's political

outlook, the SABC has been exposed to considerable political intrusion

from across the political spectrum. Controversy surrounding board and

executive appointments and removal, executive remuneration, content and

editorial policy as well as tenders, to mention only a few issues, has

plagued the broadcaster in recent times.

Like other SOCs, the SABC has had an unhealthy turnover of both board

and executive management members, having at times experienced a

mass exodus as a result of resignations or dismissals. The broadcaster

has also financially underperformed and failed to meet key targets – a fact

that becomes glaringly obvious from its reported loss of some R395 million

according to 2014/15 financial statements. Yet, as mentioned earlier, the

corporation still managed to secure the resources to boost its embattled

COO's salary with nearly R1 million.73

Irregular SABC appointments of seemingly unqualified top executives

abound. A prime example is the scandalous issue involving the

qualifications of the former board chairperson of the public broadcaster,

which, it emerged in an inquiry by the parliamentary oversight committee

on communications, had been falsified.74 In investigating the issue of the

now former COO's qualifications, the former Public Protector produced a

damning report disturbingly titled When Governance and Ethics Fail, in

which she made the following startling findings on the general state of

corporate governance at the SABC:

All the above findings are symptomatic of pathological corporate governance deficiencies at the SABC, including failure by the SABC Board to provide strategic oversight to the National Broadcaster as provided for in the SABC Board Charter and King III Report. The Executive Directors (principally the

72 See s 2 of Broadcasting Act 44 of 1999, as amended. 73 SABC 2015 http://www.sabc.co.za/sabc/annual-reports. 74 Makinana 2014 Mail & Guardian.


GCEO, COO and CFO) failed to provide the necessary support, information and guidance to help the Board discharge its fiduciary responsibilities effectively and that, by his own admission Mr Motsoeneng caused the Board to make irregular and unlawful decisions. The Board was dysfunctional and on its watch, allowed Dr Ngubane to effectively perform the function of an Executive Chairperson by authorizing numerous salary increments for Mr Motsoeneng. Mr Motsoeneng has been allowed by successive Boards to operate above the law, undermining the GCEO among others, and causing the staff, particularly in the Human Resources and Financial Departments to

engage in unlawful conduct.75

In a further shocking development, the shareholder minister amended the

memorandum of incorporation of the SABC, putting herself in charge of

the appointment, suspension and dismissal of the CEO, COO and CFO.76

She then went on to introduce the Broadcasting Amendment Bill, which if

passed, will bestow upon her the power to directly recommend names of

board candidates to the president for appointment, thereby removing the

process from the purview of the National Assembly.77

These developments point to very specific internal and external corporate

governance issues at the SABC:

a) King III, the Companies Act and the Protocol on Corporate

Governance in the Public Sector emphatically place the governance

and management of all SOCs in their respective boards' hands. The

recent move by the SABC shareholder to amend the memorandum

of incorporation, arrogating to itself the power to directly appoint

executives, is a clear usurpation of the board's powers. It may be

argued that the usurpation is legal, as it is done by an amendment of

the memorandum of incorporation, which the shareholder minister is

entitled to do.78 However, although probably legal, it is to the

detriment of corporate governance, as it renders the board redundant

and weakens it in relation to executive management. After all, one of

the key functions of the board is executive appointments,

performance monitoring and succession planning. Arrogation of this

power by the shareholder minister clearly encroaches on the domain

of the board, which King III forbids.

75 Office of the Public Protector 2014 http://www.pprotect.org/sites/

default/files/Legislation_report/SABC%20FINAL%20REPORT%2017%20FEBRUARY%202014.pdf 20.

76 Gqirana 2015 https://www.news24.com/SouthAfrica/News/sabc-take-over-uncon

stitutional-da-20151206. 77 Broadcasting Amendment Bill B39 of 2015. 78 Section 16 of Companies Act 71 of 2008.


b) From the perspective of the agency theory, the board's sanction of

exorbitant executive remuneration despite the broadcaster's reported

loss of R395 million in the 2014/15 financial year is a sign of

mismanagement and borders on a breach of both the fiduciary duties

and the duty of skill, care and diligence that the board owes to the

corporation. It also casts doubt on whether the board is fulfilling its

stewardship role as diligently as it should.

c) The Public Protector's report tellingly indicates that the SABC

executive directors failed to provide the non-executive directors with

the necessary information about the workings of the corporation. One

of the reasons why King III and other corporate governance codes

recommend a mix of executive and non-executive directors on

boards is precisely because the latter may not have all the

information required to make informed decisions in the corporation's

interest.79 Thus, where executive directors fail to provide such

information, they fail in their fiduciary duty towards the corporation.

d) In casting a vote of no confidence against one of its members in

2015, the SABC board cited

… fraudulent conduct, raising matters of the board externally without a

mandate and non-disclosure of conflict of interest.80

This further attests to the poor calibre of some of the board

members; that they are unable to uphold corporate ethics and

integrity, which are key corporate governance principles.

e) The power-plays at the SABC are not beneficial for corporate

governance. Corporate hierarchy puts the board at the helm of the

company, with executive management answerable to it. The

shareholder's steadfast and very public support of embattled

executive managers compromises the board, making it hard for the

board to take decisive action against such managers, whom the

shareholder openly prefers. This makes for a weak board, which will

most likely fail to be a focal point for corporate governance as

recommended by King III. A more appropriate approach would be for

the shareholder to have confidence in the board and maintain an

arm's-length relationship with the corporation. In any event, if, in the

79 See Clarke 2007 Del J Corp L 76; Eric et al 2007 Del J Corp L. 80 SAPA 2015 https://businesstech.co.za/news/media/82433/sabc-board-gives-non-

executive-director-the-boot.


shareholder's view, such a board fails the corporation, the

shareholder does have the power to remove the board.81

f) In the final instance, the issue involving the former board

chairperson's falsified qualifications directly affects corporate

governance: A board chairperson fulfils the important function of

ensuring that the board truly becomes a focal point for corporate

governance. The chairperson has to take the lead in the

corporation's strategic thinking and direction, and provide counsel to

the CEO.82 If, however, such a chair is a person of questionable

character who falsifies his or her qualifications, it follows that neither

the board members nor executive management will have confidence

in the chair, which lack will in turn compromise the functioning of the

board as a coherent whole. Lacking a solid foundation of ethics and

integrity, the corporation will suffer on the corporate governance

front. Of course, the more recent controversy surrounding the now

former COO's qualifications did not put corporate governance at the

SABC in a positive light either.

3.3 Eskom

This state-owned utility generates about 95% of South Africa's electricity.

Yet its ability and capacity to continue providing the country with an

uninterrupted power supply was recently questioned when the country

experienced prolonged periods of load-shedding due inter alia to many

years of maintenance neglect and a lack of the expansion needed to keep

up with the rapid development of the national economy. After 1994 many

black homes and informal settlements were electrified, but the utility failed

to expand its power stations accordingly to keep up with the increased

demand. In addition, the new power stations Medupi and Kusile were

supposed to have both joined the grid in 2014, but as at the beginning of

2017 only one unit of Medupi had gone live. Their delay in joining the grid,

along with the inadequate investment in distribution maintenance and

refurbishment over time, ultimately saw the country experiencing rolling

blackouts, particularly in 2014 and 2015. This has inevitably raised

questions as to whether the board of Eskom has over the years served the

company with skill, care and diligence.

81 The shareholder's power to remove directors derives from s 71(1) of the

Companies Act 71 of 2008. 82 Redelinghuys 2012 https://www.dailymaverick.co.za/opinionista/2012-02-01-high-

ceo-turnover-and-the-role-of-the-chairman/#.Wi7NaN-WaUk.


All things considered, though, Eskom's woes go beyond its (in)ability to

keep South Africans' lights on. The challenges the SOC has encountered

are also inextricably linked to its weakened ability to raise the necessary

capital for more power stations after questionable corporate governance

practices had seen the utility receive negative credit ratings. In particular,

Standard & Poor's indicated that the questionable suspension of the

company's CEO and three senior executives by the board in early 2015

… led … [the credit-rating agency] to have less confidence in the company's corporate governance arrangements as well as in its stand-alone credit

profile.83

Consequently, Eskom has had to secure loan guarantees from its

shareholder, namely government.

Not only did the Eskom board fire senior executives under questionable

circumstances, but the shareholder has also chopped and changed the

board every time a new minister of public enterprises is appointed.84 In

addition, the Eskom board has been implicated in meddling in the utility's

day-to-day affairs, a case in point being that of the former chairman, who

was accused of placing orders and making contractual commitments on

Eskom's behalf.85 Also, despite being a national utility with multiple

stakeholders, Eskom has often faltered in its integrated reporting duties as

required by King III.

Again, as with SAA and the SABC, the gloomy picture painted above

presents a number of corporate governance challenges at Eskom:

a) In recent times, the Eskom board seems to have lost sight of the

cardinal corporate governance rule of maintaining a distinction

between management and governance. Undeniably, the board is

legally charged with the responsibility of running the corporation –

this much is found in the Companies Act and is embraced by both

King III and the Protocol on Corporate Governance in the Public

Sector.86 However, the board is supposed to govern the corporation

83 Standard & Poor's 2015 https://www.biznews.com/wp-

content/uploads/2015/03/ESKOM-19-Mar-15.pdf; SAPA 2015 https://www.businesslive.co.za/bd/companies/energy/2015-03-19-sampp-downgrades-eskoms-long-term-debt-rating-following-suspensions/.

84 Zibi 2015 https://www.businesslive.co.za/bd/companies/2015-03-18-bailouts-are-

not-enough-for-ailing-parastatals/. 85 Joffe 2015 https://www.businesslive.co.za/bd/opinion/columnists/2015-03-25-sa-

pays-price-of-eskoms-disastrous-governance/. 86 Section 66(1)(2) of Companies Act 71 of 2008; Department of Public Enterprises

Protocol on Corporate Governance para 5.1.1.1.


by delegating day-to-day management responsibilities to the

executive management, and monitoring that these responsibilities

are discharged as per the strategic direction provided by the board. It

is therefore unheard of for the board chairperson, particularly a non-

executive chairperson, to conclude contracts on behalf of the

corporation without executive management's knowledge.

b) Regular changes in shareholder ministers, board members and

senior executives rob the corporation of the skill, competencies and

institutional memory needed to implement long-term projects,

particularly in a corporation such as Eskom that is involved in the

complex business of electricity generation. This high turnover at all

critical levels of the corporation is indeed problematic. King III also

specifically requires the board to evaluate the CEO's performance

and ensure a succession plan for the CEO and senior executives. At

Eskom, however, the CEO was dismissed in March 2015 after

serving only six months in the position, along with another three top

executives. Clearly, this does not augur well for the corporation's

long-term stability. In fact, it can be argued that the board's actions

created further instability and uncertainty within the corporation, as it

failed to manage succession within the executive team.

c) Eskom's failure over a 20-year period to constantly increase capacity

to keep pace with demand, and its failure to monitor and ensure that

key projects such as Medupi and Kusile are completed on time, bring

into question whether the utility's board has discharged its primary

duty of acting with care, skill and diligence. This, in turn, casts doubt

on the board's composition. Over time, as shareholder ministers

come and go, they are likely to have appointed directors lacking the

necessary skill, commercial experience and acumen to govern a

utility as large and complex as Eskom, which may have

compromised corporate governance.

d) King III urges boards to appreciate the effect of stakeholder

perceptions on reputation, and thus cautions them to manage

reputation risk.87 In the case of Eskom, the board failed to

acknowledge this when it chose to suspend the CEO and three other

senior executives at once, eliciting a negative credit rating from

Standard & Poor's and hampering the utility in its efforts to raise

capital in the financial markets. It may be argued that the board's

87 IoDSA King Report III Principle 8.1.


approach to the matter was rather reckless and exposed the utility to

negative stakeholder perceptions and risk.

4 Identifying key corporate governance hurdles in SOCs,

and recommending possible ways to overcome them

The general thrust of the examination of specific corporate governance

issues in the three selected SOCs above is twofold.

On the one hand, many of the corporate governance challenges

experienced by SOCs may be ascribed to a lack of appreciation by SOC

boards of the cardinal corporate governance rules, particularly the

distinction between management and governance, and the principle of

board delegation. This is compounded by a general disdain for corporate

ethics and integrity. Corporate governance is bound to fail when board

members are implicated in scandals relating to tenders and fake

qualifications. A board that allows management to develop eight

turnaround strategies in six years at a very high cost, but implements

none, as was the case with SAA, has clearly failed in its primary

responsibility of acting as a fiduciary for the corporation and discharging its

duty of care, skill and diligence. Similarly, an SOC board that has failed to

provide strategic direction to management over a period of 20 years,

resulting in the corporation's having to be frequently bailed out and failing

to deliver the public goods on which society relies, has neglected its duty

of being the driver of strategy for the corporation. There is therefore

consensus that the basics of corporate governance are suspect in many

South African SOCs.

Importantly, however, on the other hand, it would also seem that at the

heart of many challenges facing SOCs is the role of government as a

single or dominant shareholder, with political interference in the running of

SOCs appearing to be substantial. Political interference in terms of

executive managers' appointments, suspensions and dismissals goes

against the established rule of the division of power between the board

and the shareholder. The result, as has been the case in other countries

also, is that executives appointed directly by the shareholder undermine

the board, for they have an intimate connection with the ultimate corporate

authority, namely the shareholder.88 If the board can at any point be

undermined by those who are supposed to be its delegates, it cannot be

the focal point of corporate governance as recommended by King III. In

88 Gumede SA State-Owned Enterprises.


the same vein, a brazen move by government as a dominant shareholder

to amend an SOC's memorandum of incorporation so as to arrogate the

power to appoint, suspend and dismiss executives, thus bypassing the

board, is ill-conceived. It weakens the board and renders it a rubber

stamp, which flies in the face of the Companies Act, King III and the

Protocol, all of which regard the board as the primary body charged with

running the corporation, appointing executives and mapping their

succession.

It may of course be plausible to argue that government merely "intervenes"

as opposed to "interferes" in SOCs' affairs, as there is a lot at stake for the

country, and that the SOCs cannot simply "be left to collapse" while

government remains oblivious, unconcerned and apathetic. Yet this

argument in itself would reveal that government makes questionable board

appointments in the first place if SOCs are being "run into the ground" to

an extent that necessitates shareholder intervention. It would therefore

appear that the shareholder intervention argument does not hold water,

and that, judging by the detailed assessment in paragraph 3, it is in most

instances a clear case of shareholder interference, which brings both

agency and political costs.

It is therefore only logical that the seemingly dual problem hampering

sound SOC corporate governance requires a dual solution. In order to

arrest the problem of poor corporate governance in SOCs, government as

shareholder should firstly appoint fit and proper directors, having followed

a sound due-diligence process. Having professional boards composed of

highly skilled individuals with actual experience and acumen to run

complex business operations is at the heart of the solution to improve

SOC performance in South Africa, and should be non-negotiable.

5 Conclusion

In his 2016 State of the Nation address, President Jacob Zuma

acknowledged the challenges facing the country's SOCs. Indeed, the

Presidency, the National Assembly, business, civil society and ordinary

citizens have over the years observed SOCs deteriorate.

From a theoretical perspective, this is chiefly attributable to a double dose

of agency problems. SOCs are run by directors and managers who do not

own the corporations, which causes a divergence of interests between the

directors and the shareholders. At the same time, shareholder ministers

also do not own the corporations, with the real owners of SOCs being the


public. Neither of these parties can therefore be expected to watch over

the interests of the SOC with the same vigilance as they would exercise

over their own. Compounding this double agency problem is the free rider

challenge – the fact that citizens generally do not have the know-how and

institutional capacity required to monitor the performance of the

shareholder ministers and the directors. The shocking and debilitating

corporate governance issues resulting from this precarious state of affairs

have been alluded to in detail in this contribution.

South Africa cannot afford to continue subsidising underperforming SOCs.

The country needs to put measures in place to ensure optimal

performance of its SOCs so that they can contribute not only to better

service delivery but also to the national economy. It is hoped that the

proposals made here may be of value to advancing the debate and

restoring good governance in South Africa's SOCs.

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List of Abbrevations

Asian Bus Law Asian Business Lawyer

Aust J Manag Australian Journal of Management

Aust J Publ Adm Australian Journal of Public Administration

Bus Law Business Lawyer

CEO chief executive officer

CFO chief finance officer

CIPC Companies and Intellectual Properties

Commission

Colum L Rev Columbia Law Review

COO chief operating officer

Corp Gov Corporate Governance

Del J Corp L Delaware Journal of Corporate Law

IoDSA Institute of Directors in Southern Africa

J Publ Adm Journal of Public Administration


Malawi LJ Malawi Law Journal

OECD Organisation for Economic Cooperation and

Development

PFMA Public Finance Management Act 1 of 1999

PRC Presidential Review Commission

PwC PricewaterhouseCoopers

SAA South African Airways

SABC South African Broadcasting Corporation

SOC state-owned company

Documents

T Thabane and E Snyman-Van Deventer*